Telstra To Fund $1.5B Spectrum Fee Hike Via Debt

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The Federal Government is expecting a windfall of about A$3 billion over the next four years from the renewal of mobile phone spectrum to providers including Telstra, Optus and Vodafone. This will come on top of the $2 billion or so it expects from the auction of “digital dividend” spectrum in October freed up by the end of analog TV.

Comms and Broadband Minister Stephen Conroy unveiled auction terms on Thursday and renewal terms on Friday. The latter have been a source of tension between carriers and the Government which had sought to charge more for the licences.

Ovum senior analyst Nicole McCormick said Telstra was expected to pay about $1.2 billion over the next four years to retain its 800MHz, 1800MHz and 2GHz licences.

“The Government has reduced 800MHz spectrum renewal costs for Telstra and Vodafone, but with the industry having to find an estimated more than $3 billion collectively for mobile re-licensing, the Government’s agenda is clear: maximise revenue from renewals and spectrum auctions,” McCormick said

Vodafone, which faces the largest spectrum renewal bill of around $1.5 billion, will probably have to call on its global parents  –  Vodafone Group and Hutchison Whampoa  –  to assist with financing.

Telstra said yesterday it would fund its bill  –  estimated at around $1.2 billion  –  through debt.

“Cashflow-rich operators will not be so perturbed by the cash calls, others may not be so happy,” said McCormack.

Meanwhile in the forthcoming auction of spectrum in the 700Mhz band  –  part of the digital dividend sale  –  Conroy has set a competition limit of 2x20MHz to apply to spectrum in the 700MHz band. There ‘s a similar limit of 2x40MHz to spectrum in the 2.5 GHz band.

Conroy said the limits have been set to ensure a level playing field for the three bidders most likely to participate in the auction – Telstra, Optus and Vodafone Hutchison Australia – without precluding a potential new entrant.

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